XML 60 R23.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Quarterly Operating Results (Unaudited)
 12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Quarterly Operating Results (Unaudited) Quarterly Operating Results (Unaudited)

The operations of certain AFG business segments are seasonal in nature. While insurance premiums are recognized on a relatively level basis, claim losses related to adverse weather (snow, hail, hurricanes, severe storms, tornadoes, etc.) may be seasonal. The profitability of AFG’s crop insurance business is primarily recognized during the second half of the year as crop prices and yields are determined. Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time.

The following are quarterly results of consolidated operations for the two years ended December 31, 2019 (in millions, except per share amounts). Quarterly earnings per share do not add to year-to-date amounts due to changes in shares outstanding.
 
 
1st
Quarter
 
2nd
Quarter
 
3rd
Quarter
 
4th
Quarter
 
Total
Year
2019
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,024

 
$
1,960

 
$
2,123

 
$
2,130

 
$
8,237

Net earnings, including noncontrolling interests
 
326

 
209

 
143

 
191

 
869

Net earnings attributable to shareholders
 
329

 
210

 
147

 
211

 
897

Earnings attributable to shareholders per Common Share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
3.68

 
$
2.34

 
$
1.64

 
$
2.33

 
$
9.98

Diluted
 
3.63

 
2.31

 
1.62

 
2.30

 
9.85

Average number of Common Shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
89.4

 
89.7

 
90.0

 
90.2

 
89.9

Diluted
 
90.7

 
91.0

 
91.1

 
91.3

 
91.0

2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
1,619

 
$
1,833

 
$
2,008

 
$
1,690

 
$
7,150

Net earnings (losses), including noncontrolling interests
 
141

 
208

 
203

 
(35
)
 
517

Net earnings (losses) attributable to shareholders
 
145

 
210

 
204

 
(29
)
 
530

Earnings (losses) attributable to shareholders per Common Share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.64

 
$
2.36

 
$
2.30

 
$
(0.33
)
 
$
5.95

Diluted
 
1.60

 
2.31

 
2.26

 
(0.33
)
 
5.85

Average number of Common Shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
88.6

 
89.0

 
89.1

 
89.3

 
89.0

Diluted
 
90.4

 
90.7

 
90.7

 
89.3

 
90.6



Pretax realized gains (losses) on securities, which resulted primarily from changes in the fair value of equity securities, were as follows (in millions):
 
 
1st
Quarter
 
2nd
Quarter
 
3rd
Quarter
 
4th
Quarter
 
Total
Year
2019 — change in fair value of equity securities
 
$
182

 
$
44

 
$
(15
)
 
$
67

 
$
278

2019 — other realized gains (losses)
 
2

 
12

 
(3
)
 
(2
)
 
9

2018 — change in fair value of equity securities
 
(95
)
 
23

 
33

 
(223
)
 
(262
)
2018 — other realized gains (losses)
 
2

 
8

 
1

 
(15
)
 
(4
)


FIAs provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market or other financial index. AFG attempts to mitigate the risk in the index-based component of these products through the purchase and sale of call and put options on the appropriate index. AFG’s strategy is designed so that the change in the fair value of the call and put options will generally offset the economic change in the liabilities from the index participation. Both the index-based component of the annuities and the related call and put options are considered derivatives that must be
marked-to-market through earnings each period. Fluctuations in interest rates and the stock market, among other factors, can cause volatility in the periodic measurement of these derivatives and other FIA liabilities over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs.

The impact of unlocking, changes in the fair value of derivatives related to FIAs, and other impacts of changes in the stock market and interest rates on the accounting for FIAs over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs were as follows, net of the related acceleration/deceleration of the amortization of deferred policy acquisition costs and deferred sales inducements (in millions):
 
 
1st
Quarter
 
2nd
Quarter
 
3rd
Quarter
 
4th
Quarter
 
Total
Year
2019
 
$
(11
)
 
$
(33
)
 
$
(27
)
 
$
24

 
$
(47
)
2018
 
15

 
(14
)
 
17

 
(66
)
 
(48
)


Favorable prior year development of AFG’s liability for property and casualty losses and loss adjustment expenses (”LAE”) was as follows (in millions):
 
 
1st
Quarter
 
2nd
Quarter
 
3rd
Quarter
 
4th
Quarter
 
Total
Year
2019
 
$
45

 
$
41

 
$
12

 
$
45

 
$
143

2018
 
56

 
44

 
31

 
61

 
192



Prior year development in both the third quarters of 2019 and 2018 includes pretax special charges of $18 million to strengthen property and casualty insurance A&E reserves.

In the fourth quarter of 2019, AFG recorded a pretax charge of $76 million for reserve strengthening and expenses related to exit costs incurred with AFG’s plans to exit the Lloyd’s of London insurance market in 2020.

AFG’s property and casualty operations recorded catastrophe losses, including reinstatement premiums, as follows (in millions):
 
 
1st
Quarter
 
2nd
Quarter
 
3rd
Quarter
 
4th
Quarter
 
Total
Year
2019
 
$
(12
)
 
$
(12
)
 
$
(22
)
 
$
(15
)
 
$
(61
)
2018
 
(13
)
 
(16
)
 
(38
)
 
(38
)
 
(105
)


Results for the third quarter of 2019 and 2018 include pretax special charges of $11 million and $9 million, respectively, to strengthen reserves for A&E exposures related to AFG’s former railroad and manufacturing operations.

AFG recorded a pretax loss on the retirement of debt of $5 million in the fourth quarter of 2019.

Holding company expenses were $20 million higher in the fourth quarter of 2019 compared to the fourth quarter of 2018 due primarily to higher expenses related to employee benefit plans that are tied to stock market performance.